Agenda item

O&S.25/17     

The Panel was presented with a report that outlined the Council’s draft Commercial Property Acquisition Strategy. 

Prior to inviting discussion on this agenda item, the Chairman advised those in attendance that, in accordance with the Council Constitution, he had called this extraordinary meeting to enable the Panel the opportunity to consider (and make recommendations on) the draft Strategy before its presentation to the Executive.

At this point, Cllr Birch advised that he took exception to the published report suggesting that, as a Member of the Invest to Earn Working Group, he had contributed to its content.  For absolute clarity, he asked for it to be recorded that he had taken no part in the production of this report and he proceeded to advise that he opposed adoption of the draft Strategy for reasons including:-

-        his personal belief that the Council did not have the legal powers to pursue this Strategy as a course of action;

-        the number of local authorities who were in the process of adopting (or had already implemented) similar strategies was artificially inflating the Commercial Property market.  As a result, he was of the view that the market was already saturated and financial margins were therefore becoming slimmer; and

-        the lack of reference in any reports to the potential political risk arising from any changes in national Government.

In stating that the draft Strategy constituted a high risk gamble, Cllr Birch then PROPOSED the following motion:-

‘That the Panel RECOMMEND that the Executive reject the draft Commercial Property Acquisition Strategy that is being presented to its meeting on 20 July 2017.’

To instigate the debate, this motion was subsequently SECONDED.

In the ensuing discussion, reference was made to:-

(a)   the lack of any case law in this regard.  The Specialist – Legal confirmed that there was no case law and the concerns that had been raised by the proposer were therefore untested in the court system.  However, the advice received by Counsel had highlighted that Section 1 of the Localism Act 2011 had provided local authorities with far more legal powers than they previously had including the power to do ‘anything that individuals generally may do’;

In response, the proposer acknowledged these powers but advised that his concerns related to whether or not the Council actually had the power to borrow up to £75 million for commercial investment;

(b)   the experiences of other local authorities.  To mitigate the legal concerns raised, a Member highlighted that, since a number of other councils had already adopted similar strategies, they each must have undertaken their own due diligence tests before implementation;

(c)    the market becoming saturated.  To counter the concerns raised, officers advised that local authorities had, to date, invested £3 billion in commercial property, which represented only 5% of the total market;

(d)   the extent of the proposed borrowing.  As an indication of the extent of the proposed borrowing, a Member advised that £75 million equated to approximately £2,000 for every Band D household in the South Hams;

(e)   the timing of the proposal.  A Member advised that he supported the motion in light of the current levels of commercial uncertainty that existed within the country;

(f)     the role of the Invest to Earn Working Group.  In the event of the Strategy being adopted, it was envisaged that the Working Group would be presented with a ‘due diligence pack’ of information for each potential property purchase.  As part of this pack, officers gave assurances that information would be included that related to break clauses and an Exit Strategy.

When put to the vote, the motion was declared LOST.

The recommendation as outlined in the published agenda papers (page 1 refers) was then PROPOSED and SECONDED subject to inclusion of the following two additions:-

1.     That the delegated authority for individual commercial property acquisition and disposal decisions be extended to include the lead Executive Member for Business Development; and

2.     That, in the event of the Strategy being approved, the Panel be in receipt of quarterly update reports on the portfolio performance.

When put to the vote, this motion was then declared CARRIED.

It was then:

That the Panel RESOLVE that:

5.        in the event of the Strategy being approved, and, as part of its annual work programme, the Panel receive quarterly update reports on progress and performance.